Contract Management - What if My Contract Does Not Include Force Majeure?
22 April 2020
There is significant variance among contracts; many, for example, include terms such as “acts of God”, “unforeseen circumstances” and “force majeure” to cover disruption to business. But where there is no mention of force majeure or any of its equivalents, businesses may be able to exercise clauses covering “frustration” or “impossibility”. These enable the termination of a contract where a supplier cannot supply and there is no available alternative, making it impossible to fulfil an agreement.
If this clause is successful, neither party can sue for breach of contract. However, if a claim of frustration is taken to court, it will be highly scrutinised and difficult to prove. For instance, if a supplier is located in a region locked down due to coronavirus and cannot fulfil an agreement, the contract may not be automatically terminated under frustration if it cites a time period or other specific limitations. Also, frustration is not applicable where there is a guarantee of supply. Frustration is recognised in the UK, Australia, the Philippines and other countries; however, in some territories interpretation of frustration can differ, including in the US where it varies by state. It is strongly recommended that organisations seek legal advice regarding contract law at the earliest opportunity.
Coronavirus is it an act of God (CIPS)